Self-Driving Cars May Kill That Old Real Estate Mantra Of 'Location, Location, Location'

If they're sufficiently affordable, autonomous ride services create the possibility for developers to locate commercial projects farther from urban centers. according to a CBRE study.

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It’s early days for the robo-taxi business, with Alphabet Inc.’s Waymo just starting to offer an on-demand driverless service in Phoenix, but the impact for commercial office space could be profound in just over a decade if autonomous technology delivers on the promise of low-cost, low-stress commuting, according to a new study by CBRE Group.

The traditional correlation between the most desirable sites for office space in key U.S. markets and their proximity to talent, urban amenities and transportation could be subverted as larger numbers of workers are willing to commute farther if it’s a better experience, according to the report. As a result, by 2030 at least 11% of vehicle miles traveled by commuters could be by autonomous transportation; if technological progress is more rapid, more than 27% of vehicle miles traveled could be autonomous, the real estate services and investment firm said.

“The famous real estate phrase is ‘location, location, location.’ It's our belief that that is not going to be the way of the future,” David Eisenberg, CBRE’s senior vice president for digital enablement & technology, told Forbes. “In the future, people are going to be willing to go farther because their commutes are more pleasant — they're not driving themselves, they'll have high-quality media available to them, especially with 5G internet.”

As the availability of autonomous service expands over time it will have the biggest impact on U.S. real estate markets “since mass adoption of the car and expansion of the federal highway system,” he said.

The technology's impact for commercial real estate is already being factored into future building plans, architectural firm Gensler said earlier this year. That includes designing parking structures that can be converted to office or retail space and more expansive building drop-off and pickup zones. Over time it may provide opportunities to reclaim curb space dedicated to metered parking and to redevelop land in prime urban spots currently taken up by gas stations as more vehicles become shared and electric. But first autonomy has to be available.

Waymo, previously known as the Google Self-Driving Car Project, is the farthest along in commercializing robotic rides right now, though it’s also cautioned that building out the service will be a lengthy process. Alphabet CFO Ruth Porat said during the company’s Oct. 25 quarterly earnings call that Waymo “moved into very early days of commercialization” with passengers in Chandler, Arizona, where the service was launched, starting to pay for rides. Yet Waymo CEO John Krafcik also told U.S. governors at a July 2018 conference that the “time period will be longer than you think” for automated vehicles to be everywhere.

General Motors has targeted 2019 for the launch of a robo-taxi service by its Cruise unit in San Francisco, while Ford, Toyota and several other auto and tech players intend to begin launching similar services in 2020 and beyond. Yet the absence of new federal rules governing the use of autonomous vehicles and the need for thorough vetting of the real-world reliability of the technology could slow the rate of U.S. adoption.

Assuming those hurdles are overcome, there’s likely to be an increase in commercial office development in suburbs and regions outside of major U.S. cities in areas that haven’t been as desirable because they weren’t accessible by public transportation or close enough to talent pools, according to the report. In particular, that may include the sprawling Inland Empire region outside of Los Angeles or Bay Area suburbs east of Oakland, California.

CBRE Group

"If your office is currently achieving a premium because of its location, as measured by its proximity to public transit hubs or other commercial centers, you're going to lose that office premium," Eisenberg said. "That office premium is going to flow to a place that does not currently capture that, but will capture it in the future because the preferences of the people who commute to that office are going to change around them."

One day technology may indeed alleviate the stress of driving by letting a robot take the wheel (presumably of an all-electric vehicle), while superfast 5G connectivity ensures seamless communications or entertainment during the trip. Now if only we can figure out how to solve bladder-capacity limits for those longer commutes.